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The economic benefits and risks of derivative securities

  • Keith Sill

Certain events have raised concern about the risks associated with derivatives trading--witness Orange County, California or Procter & Gamble, both of which lost large sums of money using derivatives. However, the popular discussion often loses track of the benefits derivatives hold for firms, investors, and the economy as a whole. Have derivatives received a bum rap? Keith Sill admits that derivatives have risks, especially to the uninitiated, but they also have a great deal of value for the economy as well

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Article provided by Federal Reserve Bank of Philadelphia in its journal Business Review.

Volume (Year): (1997)
Issue (Month): Jan ()
Pages: 15-26

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Handle: RePEc:fip:fedpbr:y:1997:i:jan:p:15-26
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  1. Sanford J. Grossman, 1989. "An Analysis of the Implications for Stock and Futures Price Volatility of Program Trading and Dynamic Hedging Strategies," NBER Working Papers 2357, National Bureau of Economic Research, Inc.
  2. Anatoli Kuprianov, 1995. "Derivatives debacles: case studies of large losses in derivatives markets," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 1-39.
  3. Gregory Hopper, 1995. "A primer on currency derivatives," Business Review, Federal Reserve Bank of Philadelphia, issue May, pages 3-14.
  4. Detemple, J.B. & Jorion, P., 1989. "Option Listing And Stock Returns," Papers fb-_89-13, Columbia - Graduate School of Business.
  5. Franklin Allen & Douglas Gale, . "Arbitrage, Short Sales and Financial Innovation," Rodney L. White Center for Financial Research Working Papers 10-89, Wharton School Rodney L. White Center for Financial Research.
  6. Ross, Stephen A, 1976. "Options and Efficiency," The Quarterly Journal of Economics, MIT Press, vol. 90(1), pages 75-89, February.
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